Reality check: questions posed by SIAS to MNACT and MCT managers

Questions posed to the managers of Mapletree North Asia Commercial Trust and Mapletree Commercial Trust by David Gerald, president and CEO, the Securities Investors Association Singapore underscore the diversification of properties dictum for S-REITs, highlighting the challenge MNACT has in growing its portfolio.

Festival Walk and Gateway Plaza accounted for 68% of net property income of $166.2 million, recorded in 1HFY2022, for the six months to Sept 30, 2021. Festival Walk has a committed occupancy of almost 100%, but rental reversions were a negative 30% for 35 retail leases in 1HFY2022. In the three months to Dec 31, 2021, there were 49 retail leases with an average rental reversion of negative 32%.

Hence a larger portfolio, with assets such as Vivocity and Mapletree Business City would help buoy MNACT’s operational performance , given that Singapore is emerging from Covid, and is opening its borders. In addition, as people go back to office, Vivocity would get a double whammy from the office crowd and tourists. As MCT unitholders see it, MNACT unitholders are likely to benefit more from the proposed merger.

MCT’s manager has justified the merger from the point of view of growth but at what cost? “Is this acquisition critical to MCT? What can the enlarged REIT achieve due to its larger scale that MCT would not be able to do on its own? Has MCT considered the operational challenges of the two largest assets in MNACT’s portfolio?” SIAS asks.

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